Defuse the Novell time bomb

Defending Free Software against harm from sale of Novell patents

On November 22, 2010, Novell agreed to be bought by Attachmate. While
this move wasn’t particularly controversial in itself, a detail raised
eyebrows. At the same time, Novell announced that it was selling 882
of its patents to a consortium made up of Microsoft, Oracle, Apple and
EMC.

This is worrying. Given that Novell has been involved in Unix and Free
Software development for a long time, it’s likely that a number of the
company’s patents cover important Free Software technologies. In many
markets such as operating systems, desktop productivity, or web
servers, virtualisation and identity management, Free Software
programs are the key competitors to those offered by the CPTN
consortium members.

Allowing a consortium of Microsoft, Oracle, Apple and EMC to acquire
patents that are likely to read on key Free Software technologies
would do huge damage to competition in the software market. This is
yet another reason to continue FSFE’s ongoing work against software
patents.

CPTN filed for permission in Germany and the United States to form a
joint venture in order to acquire Novell's patents. As a European
organisation, FSFE has been working with the German Federal
Competition Office (FCO) in order to try and minimise the risks to
Free Software from this transaction.

December 22, 2010: FSFE expresses its concerns to the German competition office

On December 22, 2010, FSFE submitted a document
(pdf version in German) detailing our concerns regarding CPTN's role
and the intentions of the participating companies to the FCO.

Microsoft has used patent lawsuits to stifle competition from Free
Software (e.g. TomTom), and has long used unsubstantiated patent
claims for a continued campaign of fear, uncertainty and doubt against
Free Software. Oracle also has used its patents aggressively against
Google.

CPTN might also decide to sell the patents on to third parties. These
could be patent trolls (“non-practicing entities”), or members of the
consortium itself. In September 2009, Microsoft sold 22 patents
related to GNU/Linux during an auction where only non-practicing
entities were invited.

All these cases would be bad for competition in the software
market. Microsoft in particular would be holding a stash of patents
that everybody believes to relate to Free Software. At the very least,
this would make their FUD campaign much more powerful. The company
could also move into patent litigation much more aggressively, suing
competitors out of the market. (Both the legal costs and the potential
damages in a patent lawsuit are so large that they represent a serious
threat to any company that’s not really, really large.) Or CPTN sell
the patents to a patent troll and let that organisation do all the
dirty work.

As a consequence, if the sale of Novell’s patents to CPTN is allowed
to go ahead, this will significantly increase the legal threat level
for Free Software.

At the end of March 2011, the German FCO sent FSFE a "questionnaire to
market participants". This contained a slight modification of the
deal. While the FCO has asked us not to publish the questionnaire
itself, we can provide a summary:

each of the four CPTN investors will receive 25% of Novell's patents

all investors and Novell (along with its affiliated companies) will
get licenses to Novell's entire patent portfolio

CPTN will be dissolved after the transaction is complete,
i.e. within three months.

So CPTN is merely a vehicle to acquire the patents and distribute them
between the investors.

It seems that the US Department of Justice and the German FCO between
December and March signalled to the CPTN investors that there would
need to be some changes in order for the deal to move ahead. The March
2011 questionnaire mentions the following modifications to the deal:

Microsoft will sell its share of the Novell patents directly on to
Attachmate. It will receive a license to those patents from
Attachmate.

EMC will not acquire 31 patents that relate to virtualisation.

In our reply
,
we make clear that this
modification does not allay our concerns that Novell's patents may be
used to limit competition. There are several reasons to be
suspicious, notably:

access to more patents will increase the respective dominant
positions of the CPTN investors.

What will Attachmate do with those patents? The company does not
have an established track record in Free Software, and there is
nothing to keep Attachmate from either selling the patents on to a
third party, or trying to turn litigation into a revenue
driver. Could Attachmate become a second SCO?

Any financial relationship between Attachmate and Microsoft needs
to be clarified.

As a remedy, we propose that the Novell patents which CPTN is seeking
to acquire should be made available under conditions that allow
implementation in Free Software, including under the GPL. This would
be a royalty-free, perpetual license. Their owners could still enforce
the patents against proprietary implementations. But there would be
no further danger that they would be used to limit competition from
Free Software.